Great question about insurance! Yes, you'll definitely want to notify your business insurance carrier about the ownership change. Most commercial policies require notification when there's a change in business structure or ownership. When I added my partner, my insurance agent had me update the policy to include both owners as named insureds. We also had to increase our general liability coverage since we now had two people who could potentially create liability for the business. Some carriers might want to see your new operating agreement to understand how responsibilities are divided. The good news is that adding a partner usually doesn't dramatically increase premiums - it's more about making sure everyone is properly covered. I'd recommend calling your insurance agent as soon as you finalize the partnership structure. Don't wait until renewal time, as you want to make sure there are no coverage gaps during the transition.

One more important consideration that hasn't been mentioned - make sure you and your brother-in-law are on the same page about tax elections before you finalize everything. When you convert to a partnership, you'll have options for how profits and losses are allocated that go beyond just your ownership percentages. For example, you might want to allocate more of the depreciation deductions to the partner in a higher tax bracket, or structure guaranteed payments for the managing partner. Also, consider whether you want to make a Section 754 election, which can be beneficial for basis adjustments when partners join or leave. It's easier to make this election early rather than trying to add it later. I'd strongly recommend having a tax professional review your partnership agreement before you sign it. The 60/40 split sounds straightforward, but there are a lot of nuances in partnership taxation that can bite you if not handled properly from the start.

I just went through this exact process a few months ago with my never-launched marketing LLC. The advice here is spot on - you definitely want to notify the IRS even though there was no activity. One thing I'd add is to keep copies of everything you send to the IRS, including a certified mail receipt. When I sent my dissolution letter, I also included a brief timeline showing when I got the EIN, when I dissolved with the state, and confirming there was zero business activity during that period. The IRS representative I spoke with (took forever to get through!) mentioned that having this clear documentation helps prevent any automated notices from being generated later. She said it's surprisingly common for inactive LLCs to trigger reminder notices if the IRS doesn't have proper closure documentation on file. Also worth noting - if you ever need to get an EIN for a future business, having this properly documented closure makes that process smoother too. The IRS can see you handled the previous business closure correctly.

I just want to echo what everyone else is saying - definitely notify the IRS even though your LLC had no activity. I was in almost the exact same boat about a year ago with an LLC I formed but never used. One thing I learned that might be helpful: when you write your letter to the IRS, be very specific about the timeline. Include the date you got your EIN, the date you dissolved with the state, and explicitly state that there was zero business activity during the entire period the LLC existed. This helps create a clear record that there was never any taxable activity to report. I also recommend sending it certified mail so you have proof of delivery. The IRS processing times can be slow, but having that certified receipt gives you documentation that you properly notified them if any questions come up later. Since you already handled the state dissolution, you're most of the way there. Just need to close the loop with the federal side and you'll be all set. Better to take care of it now than worry about it down the road!

This might be a longshot, but are there any other Brazilian citizens here who have gone through this process? I'm curious about how the Brazil-US tax treaty affects stipend withholding. My university withheld 30% instead of the 14% mentioned by OP, and I'm wondering if I'm missing something about our tax treaty provisions.

I've been following this thread closely since I'm dealing with a similar situation as a visiting scholar from Germany. Just wanted to add a few observations that might help: For those struggling with the substantial presence test calculation, there's actually a helpful worksheet in IRS Publication 519 that walks through the exact formula. The key thing to remember is that days in the current year count as full days, previous year counts as 1/3, and two years prior counts as 1/6. Most short-term visitors won't meet the 183-day threshold. Regarding the Free File options, I found that TaxAct's free version through the IRS Free File portal actually does support Form 1040NR and can handle 1042-S situations, though you need to make sure you're accessing it through the official IRS gateway and not their regular website. One thing I haven't seen mentioned yet is that if you're claiming treaty benefits, you should also file Form 8833 (Treaty-Based Return Position Disclosure) in many cases. This is often overlooked but can cause processing delays if missed. The instructions for your specific treaty will tell you when it's required. Also, for anyone still waiting on refunds - the IRS typically takes longer to process returns with international elements, especially first-time filers with ITINs. Don't panic if it takes 2-3 months; that's unfortunately normal for our situations.

Has anyone tried the free fillable forms directly from the IRS website for 1120-S? I'm wondering if that's a viable option to save on software costs while still getting the calculation help.

One thing I haven't seen mentioned yet - if you're mailing your 1120-S, make sure you're aware of the March 15th deadline (or September 15th if you filed an extension). The IRS considers it timely filed if it's postmarked by the deadline, not when they receive it. This is different from some other tax situations where actual receipt date matters. Also, double-check that you're using the most current forms for tax year 2024. The IRS sometimes makes small changes to forms between years, and using an outdated version can cause processing delays. You can download the latest versions directly from irs.gov to make sure you have the right ones. One last tip - if your S-Corp had any unusual transactions during the year (like asset purchases, loans, or changes in ownership), you might want to consider at least getting a consultation with a tax professional even if you prepare the return yourself. The basic 1120-S isn't too complicated for simple situations, but certain transactions can have tricky reporting requirements that aren't obvious.

Another angle worth exploring is whether your state has any "assignment of prize rights" provisions. In some jurisdictions, you can legally assign your rights to a prize before actually claiming it, which might allow your friend to step into your shoes as the original winner. This approach could potentially avoid both the double sales tax issue and some of the gift tax complications mentioned earlier. The key would be having the assignment documented properly before any title transfers occur. I'd also suggest checking if your state has a specific "winner designation" process. Some states allow contest winners to designate someone else to receive the physical prize while the original winner still reports the income. This is different from a gift or sale - it's more like you're directing where the prize should go from the start. The challenge with both of these approaches is that they're very state-specific and not all states recognize them. But given the significant tax implications you're dealing with, it's worth a quick call to your state's revenue department to ask about these options specifically. One last thought - make sure to keep detailed records of all your research and communications about this situation. If you do end up with any tax questions later, having documentation showing you tried to handle everything properly from the beginning will be valuable.

I work for a state revenue department, and I can confirm that many of the strategies mentioned here are legitimate options, though they vary significantly by state. The key is acting before any titles are transferred. For assignment of prize rights, most states that recognize this require the assignment to be documented before you officially accept the prize. You can't retroactively assign something you've already claimed. The charity would typically need to be involved since they're the ones issuing the prize. Winner designation processes are less common but do exist in some states. These usually require forms to be filed with both the prize-issuing organization and sometimes with the state revenue department within a specific timeframe. One practical tip: when you call your state revenue office, ask specifically about "prize transfers to third parties" and "assignment of contest winnings." Don't just ask about general gift or sale tax rules - the specific language matters because these situations often have special provisions that regular customer service reps might not know about. Also, be prepared that even if your state allows these arrangements, the charity might have their own policies that prevent it. Some organizations have insurance or legal restrictions that require prizes to go directly to the actual winner, regardless of what state law allows. The good news is that most states recognize this double taxation issue and have some provision to address it, even if it's not well-publicized.